U.S. Fed joins global peers in fight against climate change

FILE PHOTO: The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie

WASHINGTON (Reuters) - The U.S. Federal Reserve said on Tuesday it has formally joined a global panel of central banks working to understand and reduce climate change risk after a year-long effort here to collaborate and obtain membership.

The move underscores the increased potential for American leadership in helping shape global financial markets’ response to a warming world.

Membership of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) comes after a year-long collaboration with the body, the Fed said, which allows the regulator to bring its expertise as an interest-rate setter for the world’s biggest economy and center of global capital markets, as well as allows access to its deep bench of research economists, some of whom have been delving into climate-change topics in recent years.

“As we develop our understanding of how best to assess the impact of climate change on the financial system, we look forward to continuing and deepening our discussions with our NGFS colleagues from around the world,” Federal Reserve Board Chair Jerome Powell said in a statement.

For years, the Fed has stayed on the sidelines or behind the scenes as other central banks pushed to use their regulatory and research clout to mitigate the effects of global warming, including potentially abrupt price changes from climate-related disasters that could reverberate through financial markets.

Though Republican President Donald Trump’s 2016 campaign pledge to remove the U.S. from the Paris Accord was not a technical barrier to the Fed’s joining the NGFS, it would have complicated any public commitment to fighting a phenomenon Trump has called a hoax. Democratic President-elect Joe Biden has said he will rejoin the climate pact.

Tuesday’s move also comes ahead of potential pressure from the future Biden administration to demand that regulators more actively respond to the global fight against climate change via the financial system, analysts say.

Reporting by Katanga Johnson; Editing by Bernadette Baum